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Transcept Pharmaceuticals And Paratek Pharmaceuticals Sign Merger Agreement

BOSTON, Mass., and POINT RICHMOND, Calif., July 1, 2014 /PRNewswire/ -- Transcept Pharmaceuticals, Inc. (Nasdaq: TSPT) and Paratek Pharmaceuticals, Inc., a privately-held biopharmaceutical company, announced today that they have entered into a definitive merger agreement under which the stockholders of Paratek will become the majority owners of Transcept and the operations of Transcept and Paratek will be combined.  As part of the proposed transaction, new investors (including The Baupost Group, Abingworth LLP, and other institutional investors); certain Transcept stockholders (including InterWest Ventures and Roumell Asset Management); and certain Paratek stockholders (including Omega Funds, HBM Healthcare Investments and Aisling Capital) will invest approximately $93 million in the combined organization. 

Glenn Oclassen, Chief Executive Officer and Chairman of the Transcept Board, commented:  "Following Transcept's recent June 3, 2014 special cash dividend of approximately $25.4 million, this transaction with Paratek reflects the continued commitment of Transcept's Board of Directors and management team to deliver value to Transcept's stockholders.  Under the proposed transaction, Transcept's stockholders will maintain a meaningful equity ownership stake in Transcept, which will refocus its operations as a late-stage therapeutics company with product candidates we believe possess significant commercial potential.  The transaction also provides for our stockholders an additional special cash dividend and the opportunity to realize any upside potential from our INTERMEZZO and TO-2070 assets."  

Michael Bigham, Chief Executive Officer and Chairman of the Paratek Board of Directors, commented:  "Antibiotic resistance continues to be a growing public health concern worldwide.  This transaction provides the financial support necessary for the Phase 3 development of our lead product candidate, Omadacycline, which is an important new once daily, oral and intravenous, broad-spectrum antibiotic for serious community-acquired infections. Omadacycline was designed specifically to address the mechanisms by which bacteria develop resistance to existing antibiotics.  The combined organization will have the resources to initiate and complete our planned Phase 3 registration program, as agreed with FDA per Special Protocol Assessments, for both Acute Bacterial Skin and Skin Structure Infections (ABSSSI) and Community-acquired Bacterial Pneumonia (CABP).  We will also explore additional potential indications including urinary tract infections (UTI)."   

In a joint statement made by Paratek's lead investors, Richard Lim, Partner at Omega Funds and Matthias Fehr, Partner at HBM Partners, said, "This transaction establishes a well-capitalized public company within which the management of Paratek may progress its late-stage drug pipeline through its pivotal studies.  We are excited about the prospects for omadacycline to address the growing need for efficacious, safe and convenient oral and intravenous antibiotic drugs." 

About the TransactionParatek stockholders will receive newly issued shares of common stock of Transcept in connection with the merger contemplated by the merger agreement.  Transcept will issue approximately 167.5 million new shares of its common stock to Paratek stockholders under the exchange ratio formula defined in the merger agreement. Upon the closing of the merger, existing Paratek equity holders are expected to own approximately 37.9  percent of Transcept, the persons investing in Paratek as of immediately prior to the closing of the merger are expected to own approximately 51.7 percent of Transcept, and existing Transcept equity holders are expected to own approximately 10.4 percent of Transcept, each on a fully-diluted basis.  The exchange ratio is defined in the merger agreement and is subject to potential adjustments. 

The merger agreement also contains further details with respect to a) the cash to be reserved for anticipated merger and holdback expenses of Transcept including patent enforcement expense obligations relating to INTERMEZZO; b) how further payments or royalty payments, if any, that are received relating to the sale of INTERMEZZO and TO-2070 assets will be disbursed to Transcept stockholders of record immediately prior to the Closing; and c) the excess cash that Transcept will distribute via an additional special cash dividend also to such Transcept stockholders of record immediately prior to the Closing.   

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